The Double Dip Co

question 211

Multiple Choice

The Double Dip Co. is expecting its ice cream sales to decline due to the increased interest in healthy eating. Thus, the company has announced that it will be reducing its annual dividend by 5% a year for the next two years. After that, it will maintain a constant dividend of $1 a share. Last year, the company paid $1.40 per share. What is this stock worth to you if you require a 9% rate of return?

• A) $10.86
• B) $11.11
• C) $11.64
• D) $12.98
• E) $14.23

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